VW Faces Rising Scania Bid Opposition as Alecta Rejects Deal

Apr 23, 2014 11:42 am ET

(Updates with closing share price in seventh paragraph.)

April 23 (Bloomberg) -- Volkswagen AG, Europe’s largest carmaker, faces increasing opposition to its 6.7 billion-euro ($9.3 billion) bid for the rest of heavy-truck maker Scania AB after two minority shareholders rejected the offer.

Alecta, which holds 2.04 percent of the stock, and AFA Foersaekring, which owns 0.4 percent, said today that they would not support VW’s bid of 200 kronor ($30.4) a share for the Soedertaelje-based company because the price is too low. VW declined to comment on the status of the offer, said Marco Dalan, a company spokesman.

The two join AMF, Skandia, AP4 and Investor AB in rejecting VW’s proposal, bringing the combined stake of major shareholders not supporting the bid to at least 5.2 percent. Swedbank Robur, which controls 1.87 percent of Scania and is the fourth-largest shareholder, hasn’t announced its plans. A Swedbank Robur rejection would mean investors with about 7.1 percent of the shares were against the deal, inching closer to the 10 percent mark that would scuttle the offer.

Volkswagen, which said earlier this month it won’t raise the price, only plans to pursue the bid if shareholder acceptance reaches 90 percent, the threshold needed under Swedish law to force remaining owners to sell their holdings and delist the company. The offer is 36 percent more than Scania’s closing price on Feb. 21, the day VW announced the bid.

High Hurdle

“Achieving the 90 percent acceptance threshold for VW is not a given,” Alexander Whight, a JPMorgan Chase & Co. analyst, said in a note to clients published yesterday.

JPMorgan estimates that retail shareholders and index funds owning 5.2 percent of Scania may also reject the bid. When including major shareholders such as Alecta and AMF, that would bring the total rejections to more than 10 percent.

Scania dropped 10 kronor, or 5.5 percent -- the steepest decline since October 2011 and lowest level since the day VW announced its offer -- to 173 kronor at the close of trading today in Stockholm.

VW already controls 62.6 percent of Scania’s capital via direct and indirect holdings. The bid, which expires April 25, is meant to push forward cooperation between the Swedish truckmaker and MAN SE, which VW also controls.

Scania’s full integration into VW is vital for the German carmaker’s effort to forge a global heavy-truck business that can compete with industry leaders Daimler AG and Volvo AB. VW has reaped limited financial rewards for the billions of euros invested in the last decade to purchase control of Scania and MAN as minority investors resisted efforts to share technology that would boost profit.

Three-Way Cooperation

VW has achieved only 200 million euros in savings from joint work among its light commercial-van unit, Scania and MAN. VW’s goal is to deepen cooperation between the three businesses in areas such as drivetrains, chassis, cabins and electronics to reach annual operating profit synergies of 650 million euros.

The automaker already has a domination agreement with MAN, which means the two can legally work more closely. That leaves Scania as the last unit preventing VW from creating an integrated heavy truck division.

Alecta, a Swedish pension provider, said its decision was based on its own analysis and the conclusion by an independent committee of Scania’s board last month that the bid doesn’t fully reflect the company’s fundamental long-term value, according to a statement today on its website.

Bid Support

As VW has stated that the bid is final, any increased offer for Scania “would come with reputational risk and potentially lawsuits -- both of which we believe VW would wish to avoid,” Whight said.

Not all shareholders have a negative view. Nordea Fonder said in February that it intends to accept the offer. AP1 and Lannebo Fonder have sold their respective stakes of 0.3 percent and 0.4 percent, Dagens Industri reported April 8. Didner & Gerge, which holds 0.63 percent of the stock, said yesterday it will accept the bid. SEB Fonder and Handelsbanken Fonder have also decided to accept, according to Dagens Industri.

The Swedish Shareholders’ Association, which represents thousands of smaller Swedish equity investors, on April 16 recommended its members accept VW’s offer for Scania.

--With assistance from Gaurav Panchal in London and Christoph Rauwald in Frankfurt.